July Data and Expectations for an October Rate Cut Amid Inflationary Pressure
The decline in production and sales in July has made a Central Bank rate cut in October a strong expectation.
Signs of contraction in industrial production and retail sales in July are forcing economic management to cut interest rates in October despite rising inflationary pressures.
Production and Sales Contraction Observed in July
Data for July gave significant alarm bells in industrial production and retail sales. According to TURKSTAT data, retail sales recorded their lowest increase of the year at 0.2 percent on a monthly basis.
Annual Decline Streak in Industrial Production
According to TURKSTAT data, industrial production contracted by 0.3 percent annually, marking the third consecutive month in this downward trend. Economists predict that growth could turn negative in the third quarter.
Central Bank and Interest Rate Cut Plans
The Central Bank, which could not cut interest rates last week due to oil prices exceeding 100 dollars, is now widely expected to carry out a 1 to 2 percentage point rate cut in October.
September Inflation and Leading Indicators
Although annual inflation receded slightly in August, the seasonally adjusted rate did not drop below 2 percent. Leading data for September indicate that inflation maintains its upward trend.
Year-End Growth Forecasts and Political Pressures
It is estimated that year-end growth, set at 3.3 percent in the new Medium-Term Program (MVP), could drop below 3 percent or even to 2.5 percent. This situation increases the pressure on President Erdoğan.
Efforts Regarding Minimum Wage and Pensions
Minister of Treasury and Finance Mehmet Şimşek announced that work is being carried out regarding pension raises due to the decline in purchasing power and incoming complaints.